Market Monitor, Friday, 05/30/2008

CME's Feb'09, May'09, Aug'09 and Nov'09 Regional Housing Futures at this Link . Gives us some observation of what market participants see going forward.

I'll want to make note to you here that the italics numbers are what the CME displays as a "gridded" value. I (Jeff Bailey) view that as NOT reliable and no real trade has ever been observed.

For example; see May'09 Boston? From 12/10/07 155.40, it stayed that way until just recently when I checked the value on 04/30/08 it had changed to 154.00, so that's got to be a trade. May'09 Denver hasn't seen a trade. Ah, but Las Vegas, Los Angeles, Miami, NY Metro and San Diego all saw relatively "early" trades.

Several months ago I asked traders and investors that deem the housing sector to ask some questions as to "why" different regions see what they're seeing. What did you come up with? What scenarios?

What might Las Vegas, Los Angeles, San Diego and Miami have in common? I (Jeff Bailey) might think "immigration." There might have been other "economic" dynamics at play that created GREAT stimulous to the economies that had strong demand for housing, then being overbuilt (tends to happen in any free market economy, regardless of industry) as that's what creats cycles.

Las Vegas ... I think "gambling!"

San Franciso ... I think "financial industry" and perhaps "shipping."

Now Denver ... Kind'a stable. I live in/near Denver and in the 80's it was all oil. That bubble burst and Denver diversified. Several mutual funds and hedge funds now. Telecom has a rather strong hold. And we've got Denver Intl. Airport. You know, the one with the baggage distribution problems when first built. Looks like a giant tent? Yep, recently bankrupt Frontier's hub. But Denver? Hmmm... if I were CEO of a company and my employees did a lot of traveling around the country. Might be the center-point for cutting down on travel. Could see a client in Los Angeles. Could go see a client in New York. If I were based in New York, what would it cost in air fare, or gasoline to see the client in Denver, Dallas and Los Angeles? I don't know if that's why Denver showing some stability. I do see the UHaul stations with a lot of trucks and trailers in their lots. The towns with FEW trucks and trailers usually suggests people LEAVING and not coming, or staying.

If you drive by a UHaul, or Ryder truck rental this weekend, just look and see how much equipment they've got. Next month, make a note and check it again when you drive by.

Several sessions ago I mentioned that I would be monitoring this roll from May'08 expiration, and other than perhaps Boston, Denver and NY Metro, the roll looks relatively bearish. That is, the "hedges" probably simply rolled for lower prices.

I included Feb'08 to give us a perspective that near the end of Feb'08, where things stood.

For May'08, Boston actually showed some improvement from its 2/29/08 benchmark of 152.20 to 05/15/08. Let's use that as an example of a bright spot, or a "stabilizing" housing market since 02/29/08, but you'll notice the decline for the May'08 Boston futures since June'07.

Las Vegas, Los Angeles, Miami and San Diego are more than likely viewed as the "troubled" regions. They tend to show red for several benchmark dates, then flatten out with blue, then go red/lower again.

Looking out what I'd consider to be SHORT-TERM (for housing) we're seeing some green, mixed with blue, with Chicago, Miami, San Diego, San Franciso and Washington DC making new lows.

Now, get out your graph paper. Make your PnF chart. Use a $1 or $2 box, and start charting with you 3-box reversal technique. Chart the Composite if you'd like a BROADER feel for things. Donald Trump probably charts each region, and wants to buy the strongest first, then looks for any leadership there to start nipping away at other regions that show improvement (if he can find any at this point). It's really no different than us stock traders that "buy strength" and "sell weakness." Right?

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Jeff Bailey : 5/30/2008 6:56:33 PM

M, m, mmmmmm ... DIA -1.6% for the month.

SPY +1.4% for the month.

RUT.X +4.5% for the month.

QQQQ +5.9% for the month.

BIX.X -8.7% for the month.

TNX surged 287 bp on the month.

DXY +0.4% for month.

Noted the Dow components 20DayNet% and there was a THEME. "Financials" weak.

GE and GM do have some "finance" arms and while parts of GE's business is firing on all cylindars, those that read their earnings press release know where the problems were.

Yesterday I had some time and was snooping around and reviewing some things.

Oil trade was "crazy" yesterday, but did provide, or looked to provide some opportunity.

A "focal point" right now, or yesterday, was the sudden shift and some "out of whack" between the crack spread and VLO's price.

See back on 04/01 and 04/02 how the then current month (Column AA), which was May Gasoline/Crude crack was measuring north of 26-ish? And VLO's price was $51.91, then $51.97?

Yesterday, I saw that as I was snooping.

A little guarded this afternoon as the June unleaded and heating oil contracts expire, and I've never been sure just what to expect once they settle. Would the bid in VLO just "go away," or was it there to stay?

TSO $24.85 +6.83% had a good day too. Still, VLO has traded STRONGER even during decline and eroding crack spread on RELATIVE basis, and when looking new long, I like to stick with a "stronger" name, just in case things don't go as planned.

Nice little trade today. Will continue to monitor.

Do you see how the cost of inputs (oil's price) has risen much more notably from 03/31/08 to today? Yes! Unleaded has risen too, but not as much as the input (oil).

Next time you're filling up the tank, ask the guy/girl at the pump next to you what they think of gasoline prices.

I like to do this. Most respond ... "this is crazy, these guys are making a killing!"

Well .... it depends on who "these guys are" and of late, it hasn't been the refiners.

If we do get another leg up on Monday (to complete a 5th wave for the rally from Monday's low), the Fib projection for it is at 1415.61 (for equality with the 1st wave). This is nearly on top of the 62% retracement at 1414.80 and makes for a good upside target. Now all the bulls need to do is keep it from dropping below 1397 on Monday morning.

Keene Little : 5/30/2008 4:05:23 PM

Monday should definitely be telling now. SPX finished just below the bottom of its sideways triangle pattern (uptrend line from yesterday afternoon's low) but not below yesterday afternoon's low. That means the bulls need an immediate rally on Monday to save this from turning more bearish. The bears need an immediate move lower and can not afford to see SPX back above 1405 otherwise another rally leg will be likely. So we'll get our answer quickly. Have a great weekend.

The sideways consolidation pattern for SPX remains potentially bullish although there are a few things about it that have me thinking it could catch traders leaning the wrong way (bullish) on Monday. It looks like we'll have to wait until Monday for resolution--a break below Thursday afternoon's low (1397.19) is required to negate the bullish sideways consolidation pattern. Until then it does look like it could resolve to the upside and therefore if you're short I'd think about going flat or hedged for the weekend. 60-min chart: Link

Jeff Bailey : 5/30/2008 3:40:41 PM

The bullish side of me continues to monitor the weakness, or relative weakness in the financials and has me somewhat cautios.

The bearish side of me continues to monitor the weakness, or relative weakness in the financials and implications of they get one of those crazy bids to start the new month.

Linda Piazza : 5/30/2008 3:40:24 PM

Sorry, I was wrong. The OEX's monthly candle is currently a doji or near doji, but the body of the SPX's is too currently too large for that. It's still a small-bodied candle with a longer upper shadow and not quite as long a lower shadow, but, barring a strong decline into the close, it won't be a doji or a near doji. The longer upper shadow is not a good thing, but it's not as potentially bearish a candle as the OEX's near doji.

Linda Piazza : 5/30/2008 3:35:42 PM

Do you have JUN credit spreads that you might be able to close for a nickel or dime (or even for $0.15, if you're ultra conservative like me)? If so, you might take a look and decide if you want to take some of that risk off the table. May's monthly candle is going to be a doji for the SPX and OEX. There's some hesitancy showing up about next direction. It could be that June's candle will end up with the same kind of formation, but just consider whether that last nickel or dime is worth keeping the risk on the table. For some, the answer will be yes, and for others, no.

Keene Little : 5/30/2008 3:33:16 PM

The DOW dropped into the red on that bit of selling and now is being pushed right back up into the green. I think we know how this day is going to end.

Keene Little : 5/30/2008 3:30:55 PM

NDX has made the first lower low in this last pullback and that is a good indication that the high is in. It's a good setup for at least a larger pullback on Monday.

Linda Piazza : 5/30/2008 3:30:44 PM

The TRAN has been a real driver of the SPX, OEX and Dow gains, which is one reason I've been watching it so carefully today. Many people (mistakenly lately) believe that Dow theory is showing that the markets are on a buy signal, so they're encouraged to buy those other indices when the TRAN is moving higher. In many cases, they don't tend to move too far any one direction if the TRAN is going the opposite, although that's of course not always true.

Now that the TRAN hit an almost equal high (from this morning's), I wanted to see if still maintained 30-minute closes at the 9-ema, now at about 5434. It's clinging to it as I type.

Keene Little : 5/30/2008 3:21:06 PM

Sudden little bout of selling kicking in here. Now we'll see if there's any follow through or just more whipping around.

Linda Piazza : 5/30/2008 3:18:50 PM

The TRAN is chugging up toward the morning's high of 5452.38. It's currently 5442.80, but just reached an afternoon high of 5451.66. The 30-minute 9-ema is now 5436.20. Now that it's tested its previous HOD so closely, equity bulls don't want to see it drop.

Linda Piazza : 5/30/2008 3:06:03 PM

Here's what the mixed-up action does: on the 15-minute chart, the SPX looks more likely to rise toward 1404.40 and maybe even 1406.56. On the 30-minute chart, it looks likely to fall toward 1402 and maybe even 1398.97. How are you going to determine what happens over the short term when you have mixed-up signals like that?

Keene Little : 5/30/2008 3:05:28 PM

The techs are clearly getting all the love today. NDX is up +1% while the DOW struggles to hold in the green. This is typically not a bullish setup and that's why I don't trust the upside. NDX is pressing to new highs here but today's pattern continues to look like an ending pattern. The high being put in now could be the last one before tipping over.

Jeff Bailey : 5/30/2008 3:04:21 PM

Treasuries finished with some price gains, yields lower. The 13-week yield finishes down 1.5 bp at 1.850%, while the 5-year down 0.6 bp at 3.407%. The benchmark 10-year yield down 3.3 bp at 4.046%, while the longer-dated 30-year yield fell 5.8 bp at 4.707%.

Jeff Bailey : 5/30/2008 3:01:18 PM

SIX $2.06 +3.00% ... back to test its 150-day SMA.

Keene Little : 5/30/2008 3:00:27 PM

Every time it looks like there might be a little breakdown (in the DOW and SPX) someone comes along and gives it a little goose. They're both holding in the green and I wouldn't be surprised to see it hold that way into the close. The RUT is trying to press higher but watch for possible Fib resistance near 749, less than a point away here.

Jeff Bailey : 5/30/2008 2:59:28 PM

Well ... VLO-FW $4.05 x $4.15

VLO $51.00 +4.85% ... WKLY R2 $51.87 may well get the test.

Jeff Bailey : 5/30/2008 2:54:27 PM

Might look for some broader equity weakness into today's close.

Linda Piazza : 5/30/2008 2:46:13 PM

Still here but still not seeing anything changing. Be aware that the 3:00 period sometimes brings a change in tenor. That could be particularly true since this is the end of the month and a Friday. My own scenario for the day and the end of the week was some chopping around, but that could include a sprint up to test resistance again or a pullback if some want to close positions ahead of the end of the week. Whatever happens, it may or may not have particular relevance for next week, so don't let end-of-week and end-of-month machinations convince you to take home more risk than you're comfortable taking home this weekend.

Jeff Bailey : 5/30/2008 2:41:32 PM

June unleaded lost a little steam ...

Jeff Bailey : 5/30/2008 2:33:03 PM

VIX.X 17.71 -2.37% ..

Jeff Bailey : 5/30/2008 2:28:32 PM

Swing trade call exit alert! ... for the Valero Energy VLO June $47.50 Call (VLO-FW) at the bid of $3.80.

After popping above a descending trendline off its 3/31, 4/14, 5/09 and 5/20 highs, the VIX ran up into Friday morning and has since then been dropping back. Yesterday, it touched that descending trendline and bounced by the end of the day. Today, it's above the trendline but below the daily 9-ema at 18.34. Therefore, it's still vulnerable to another test of that trendline, a test that would occur at about 17.00-17.05, if I'm eyeballing it correctly. Be aware, though, that what we're seeing is a retest of that former resistance to see if it now holds as support. Bears want that support to hold on daily closes; bulls want the opposite.

Linda Piazza : 5/30/2008 1:57:46 PM

I'm not seeing anything yet that's going to change the appearance of the monthly charts on the SPX and OEX. (See my 9:56:25 post for further discussion.)

Keene Little : 5/30/2008 1:49:29 PM

I'm not sure what this market is doing today. NDX has been chopping its way higher since the morning's pullback and that makes it look like an ending pattern to the upside (either that or it's getting ready to explode to the upside). The DOW and SPX continue to chop sideways with little whipsaw moves.

Probably the smartest thing to do is take your marbles and go home--this is looking too much like a summer Friday and not worth trading. If it breaks down I'd be interested in shorting it but I don't trust the upside enough to recommend trying a long into the close.

Linda Piazza : 5/30/2008 1:43:47 PM

Once again, the TRAN bounced from its 30-minute 9-ema although it pierced it again. That's now at 5427.90 with the TRAN at 5435.37.

Here is McMillan's weekly commentary. - After breaking down last week and generating sell signals on most of our indicators, the market has rallied all week this week. This week's rally -- built on several diverse factors such as a declining oil price, month end window dressing, and dollar rally -- has, somewhat surprisingly, not been able to budge the technical indicators from their bearish stance.

The $SPX chart took on a negative tone with the breaking of the bullish trend line that had dated back to the March bottom. Also, the 20-day moving average rolled over and began trending downward. Even though the market has rallied this week (for 3 days), it has not yet overcome that moving average. In a broader sense, the May highs (near 1425) and the May lows (near 1375) are the two important levels to watch. A bullish close above 1425 or a bearish close below 1375 should clarify the picture, as far as the $SPX chart goes.

The equity-only put-call ratios are less ambiguous: they are bearish. After generating sell signals last week, they have not wavered. These intermediate-term indicators had been on buy signals since March, so the fact that they have rolled over to sell signals is meaningful. It is possible, I suppose, that a double sell signal could occur -- similar to what happened in October, 2007, and in June-July, 2007, although it is certainly not necessary for that to be the case.

Market breadth remains weak, and the breadth continues to remain on the sell signals first issued last week.

The volatility indices -- $VIX, in particular -- did not confirm the sell signals issued by the other indicators. $VIX remains in the bullish downtrend that has existed since its March highs (i.e., the market's lows). Yes, it did rise above its 20-day moving average briefly, but it did not overcome the 20 level -- an area which it has not closed above in nearly a month.

In summary, last week's sell signals have not panned out. But this week's rally hasn't really been able to reverse them. Thus, neither the bullish nor the bearish case appears strong at this juncture. What we expect will happen -- mostly because of the sell signals in the equity-only put-call ratios -- is that this current rally will top out without exceeding the Mayhighs; then the 1375 level will be broken. That will establish a pattern of lower highs and lower lows, and a larger downward move will ensue. However, a move above the May highs would cause us to re- evaluate this scenario.

Linda Piazza : 5/30/2008 1:11:44 PM

What I can say is that the TRAN did again bounce from its 30-minute 9-ema, continuing a pattern that has been in place since Tuesday morning's dip. However, it has not yet reached a new high of the day or week. The last bounce this morning produced bearish price/RSI divergence on the 30-minute chart. While that's nothing but a warning to pay attention and no promise of any downturn, I am paying attention. That 9-ema is now 5426.60 and the TRAN is now 5436.66.

Keene Little : 5/30/2008 1:07:32 PM

We're getting close to hopefully finding out whether this market is going to get at least more bullish in the short term or more bearish. The consolidation since yesterday's high for SPX is looking like a little sideways triangle. The bulls want to see another pullback to just above this morning's low to finish the pattern and then resolve to the upside. The bears would obviously like to see a break down below this morning's low.

As shown on the 30-min chart in green, if it resolves to the upside it's going to give the rally from Monday's low an impulsive look with a 5-wave move up (probably to a high this coming Monday): Link
. That would set us up for at least another leg up next week after a pullback. But a break below yesterday's low would negate the triangle pattern and suggest a breakdown in progress. We sit here and wait for resolution.

Jeff Bailey : 5/30/2008 1:06:42 PM

I should also remind you that today is June Unleaded (rb08m) expiration.

Linda Piazza : 5/30/2008 1:04:44 PM

I'm here and I'm watching, but I'm trying to be conservative about posting. As I said earlier today, when we have these choppy conditions set up, scrambling indicators, chopping the RSI around the neutral level, too, it's not useful to post every little potential short-term upside or downside target because they're rarely hit as the indices just narrow their trading pattern. Right now, the OEX is ringed with thickening support and resistance lines, and it's difficult to point to any one and say that's the one that will make the difference. It looks to me now as if the OEX would have to make sustained 15-minute closes above 642.74 or below 635.45 (or maybe 639) before anything changes. Inside that, there's just a choppy hard-to-decipher range.

Jeff Bailey : 5/30/2008 1:02:40 PM

The $50 strike in VLO could be important.

Imagine an institutional trader either "covered call" and having seen some changes in crack spread last couple of weeks, decides to "save the position" and buys back the calls.

Or, a NAKED call seller that thought, or thinks oil prices continue to surge higher and outpace unleaded. That trader might have to assess RISK into expiration. Either buy back the calls, or buy the underlying stock.

Linda Piazza : 5/30/2008 1:01:06 PM

I didn't imagine the Fed speak today after all. (See my 12:24:36 post.) Eric Rosengren, the president of the Boston Federal Reserve Bank, spoke today and we're beginning to see bullet points from his talk. He's mentioning how hard it is to get jumbo loans, tagging the current drop in housing starts as the biggest in 50 years. He believes that if the housing mess continues, small banks could be at risk. Markets don't appears to be much impacted by what he's said.

Jeff Bailey : 5/30/2008 12:59:50 PM

I prefer to use the FUTURES contracts for crack spread.

However, if you aren't able to view futures as I've shown, the USO and UGA net% changes are better than nothing.

TSO's CEO was talking about how quickly things "changed" just the past 3-weeks with the crack spread between crude oil and unleaded, as well as diesel.

Refiners have been smacked down the past year as oil prices (cost of inputs) has vastly outpaced unleaded.

Jeff Bailey : 5/30/2008 12:36:04 PM

USO +0.29%

UGA +0.35%

USO +0.40% 20-dayNet%

UGA +4.85% last 20-dayNet%.

For those that listened to TSO's CEO on CNBC last night, you see what he was talking about.

Jeff Bailey : 5/30/2008 12:34:00 PM

VLO $49.99 +2.77% ... VLO-FW's $3.30 x $3.35

Jeff Bailey : 5/30/2008 12:32:45 PM

Seeing some notable action today in the VLO June $50 Calls. Be ready.

Keene Little : 5/30/2008 12:30:40 PM

I forgot to mention with the gold chart that if the current bounce fails and breaks below 873 from here then the wave pattern suggests some very strong selling to follow.

Keene Little : 5/30/2008 12:25:35 PM

On Monday I had shown a chart of gold (August contract) and at that time was watching to see if the bounce off the early-May low was going to turn into something impulsive (5-wave move up) or be left as a corrective 3-wave bounce. The high on May 9th (895) was the important level to watch since an overlap of it would leave the May bounce as just a correction and would be pointing gold lower. This is the chart from Monday: Link

The pullback this week not only overlapped that 895 high but the drop from the high on May 21st is impulsive (5-wave move down). That establishes the fact that the May bounce was just a correction and the decline into this morning's early low was the first leg down of a new decline: Link

With the completion of the 5-wave move down we should now get a correction of the decline from May 21st (A-B-C bounce) which would be another short play setup, probably early next week.

Linda Piazza : 5/30/2008 12:24:36 PM

When I was having trouble sleeping last night, I turned on CNBC and thought I heard that a Fed Governor was speaking today, I thought at about 12:30. I haven't been able to find any information on that, even on the usual sites that list such things, so perhaps I imagined it or misheard it. However, I'm going to keep searching and I'll let you know if I find out anything.

Linda Piazza : 5/30/2008 12:22:33 PM

I'm watching, but not much is changing, so there's not a lot to say. The TRAN currently tests its 30-minute 9-ema, but it hasn't closed a 30-minute period beneath it nor punched down toward the next support level again, as it did earlier this morning. The OEX and SPX are still bunching up, either preparatory to another climb or a decline. Standard technical analysis might suggest that we assume that because they're bunching up at the top of the climb off Friday's and Tuesday's lows that they're going to break to the upside, but I'm not personally assuming any such thing. I'm trying to stay as neutral as possible.

One thing to keep in mind today is end-of-month shenanigans. There could be some moves in particular stocks that have more to do with eom manuevers than anything else. Although I suspect any squaring of positions in that respect have been completed before today. Then new money coming into the market early next week (or will it be redemptions this time?).

Jeff Bailey : 5/30/2008 12:01:41 PM

The last few days I've received several email regarding Pacholder High Yield (PHF) $8.71 +0.92% per comments/analysis from 04/18/08 MM. My suggestion has been to "leg out" or sell some into this month's dividend.

Keep the TRAN on your radar screen. Since Tuesday morning's dip, the TRAN has closed every 30-minute period at or above the 30-minute 9-ema. That's now at about 5411.90, with the TRAN currently at 5417.23. It might just be time for the TRAN to make another quick dip down to or toward the lower side of its smallest Keltner channel, with that now at 5386.30, but if that happens, SPX, OEX and Dow bulls want a quick pop back up and they don't want to see the TRAN establish a pattern of resistance at a turning-lower 9-ema. This is important because of the observations noted in my 11:23:48 post.

Linda Piazza : 5/30/2008 11:50:48 AM

The OEX just isn't going much of anywhere at all, narrowing its range today. The same is true of the SPX, and the 15-minute charts of both feature RSI levels near 50, each about as neutral as you can get.

Keene Little : 5/30/2008 11:42:52 AM

I'm not sure how high the bounce to correct the drop from this morning's high will get but this is the first place I'd look to short it. It could chop around for a bit longer and make it a little higher but the risk is it will drop right back down at any time. The stop needs to be at a new daily high which is too much from here. Take a stab at a short but keep your stop reasonably close. Above a 62% retracement would start to worry me if short. Another way to enter a short is on a breakdown from here to a new daily low.

Jeff Bailey : 5/30/2008 11:37:02 AM

Kinross Gold (KGC) $19.84 +1.12% Link ... Company announced earlier this morning that first production of gold and silver from its Kupol project in the Chukotka region of the Far Eastern Federal District of Russia has begun.

The TRAN has been particularly strong this week, but look what the strength has produced: a test of the former ascending trendline and a doji for today (so far) as that trendline is retested. Link

Linda Piazza : 5/30/2008 11:21:12 AM

The OEX again looks vulnerable to lower levels, but that potential support has now risen and is now at 638.05-638.36. Whether it will be reached this time, I don't know. This chopping around near resistance fits with my scenario for today, as you know from my posts since Tuesday's Wrap, so I'm not sure it's even appropriate to be listing potential short-term upside or downside targets because choppy trading conditions create conditions that aren't particularly amenable to technical analysis.

If we now get another minor new low for the move down from this morning's high that should be followed by a bounce to correct the move down. That will be another opportunity to get short against this morning's high.

Measures the number of stocks' charts that currently have a "buy signal" intact on the supply (O) and demand (X) chart. Link

Linda Piazza : 5/30/2008 11:10:48 AM

Keene just mentioned the new high made by the NDX. The MID, one of the high fliers this week, has not made a new high today above yesterday's, although it's not to far from one. Rather, it seems to be chopping around near yesterday's high, either in preparation for another break higher or a downturn. If it can break to a new high and maintain that new high, an important point, it has a potential upside target of 891.19. I wouldn't count on that being hit, but I would at least watch the MID, as it's often served as one of those leading index types for the markets, showing when there's some speculation away from the big caps.

I'd watch but I wouldn't count on the MID breaking out and hitting that upside target. I see the RUT, another recipient of a more speculative tenor in the markets, has not approached yesterday's high, either. The TRAN, sometimes serving as an indicator index for the SPX, OEX and Dow has hit a new high today above yesterday's, however, with a potential upside target and potential resistance on 30-minute closes at 5508. So, I'm seeing some mixed evidence among these leading-type indices, with some looking as if momentum is waning enough that they need to rest, at least. Whether they'll press higher afterward or decline isn't yet known.

NYSE Composite ($NYA.X) ... daily interval bar chart with your conventional retracement. While monitoring the A/D, gives traders and investors not only a look at the "outside," but the inside as well. Link

Keene Little : 5/30/2008 11:00:35 AM

The sharp drop back down means the morning high needs to hold so if you shorted the bounce lower your stop now to a couple of ticks to a new daily high.

NDX has made a new high above yesterday's and is the only one that can tolerate a new high (from an EW perspective) without turning the price pattern bullish since it now is a 7-wave move up from last Friday and that makes it a corrective rally so far (double zigzag a-b-c-x-a-b-c). A new high for the DOW and SPX would give it a 5-wave advance and be bullish. The RUT still leaves me guessing but it's interesting that it's lagging behind the others this morning.

Jeff Bailey : 5/30/2008 10:50:04 AM

JetBlue Airways (JBLU) $4.11 -0.96% Link ... Priced $175 million in 5.5% convertibles due 2038. The offering was $15 million more than previously announced. Proceeds will be used to pay down debt, including the repayment of up to $175 million principal amount of its 3.5% convertible notes due 2033, as well as for general corporate purposes.

I'm back. I see we've had a little bit of a whippy market this morning. SPX shows a 3-wave bounce off yesterday afternoon's low and is a setup for the short side against yesterday's high. We might see a minor new high yet but this is a good place to try it.

Jeff Bailey : 5/30/2008 10:43:39 AM

Can "turn on the volume" ... stock started showing up on most actives several weeks ago Link

Kintera (KNTA) $1.09 +60.29 Link ... Company announced today that it has agreed to be acquired by Blackbaud, Inc. (BLKB) $23.22 -5.45% Link in an all-cash deal worth approximately $46 million, or $1.12/share.

Jeff Bailey : 5/30/2008 10:35:38 AM

Quanta Capital (QNTA) $2.66 +41.48% Link ... Company announced it has agreed to be acquired by Catalina Holdings for approximately $197 million. If the deal is consumated, QNTA shareholders will receive $2.80/share in cash.

Not the strongest way to climb or not, the climb continues. The OEX has potential resistance on 15-minute closes at 642.76. The daily 30-sma, hit yesterday before the OEX was knocked back, is now 643.03.

Jane Fox : 5/30/2008 10:22:06 AM

I think this would be a very good spot to take a long swing trade in Gold. It looks like it is making a higher low and you have a very clear stop. Link

Linda Piazza : 5/30/2008 10:21:27 AM

The OEX hasn't dropped and instead is moving higher again, but it keeps forming 15-minute closes at or below potential Keltner resistance on 15-minute closes now at 640.48, so it maintains vulnerability to a downturn. It may be climbing, but that's not the strongest pattern in which to climb. Again, "vulnerability to" is not a promise that such a downturn, now to 637.60-638.07, will occur, but only a warning that it could.

It looks as if efforts are underway to steady the markets and therefore steady the A/D line above potential support now at about -160. The A/D line is now -105, and it's at all certain yet that those efforts will be successful. However, do be aware of the importance of this level. Equity bulls want this level to hold and equity bears want the A/D line to cascade lower.

Linda Piazza : 5/30/2008 9:56:25 AM

Art Cashin mentioned some worrisome signs on the SPX's monthly chart this morning, while others talked more positively of the monthly gain perhaps seen on the SPX, depending on what happens today. I thought I'd show you how the monthly chart looks on the OEX: Link
Such a doji, at the 30-sma and below the 10-sma, is a potential reversal signal, of course, especially when forming at resistance, but what it actually says is that there's uncertainty about next direction, not certainty about the reversal. So, with uncertainty about next direction, doesn't it make sense to prepare your what-if plans? What if markets do roll down again? Do you have too much bullish risk on the table? What if the OEX pops higher next week and shorts rush to cover in a light-volume environment, propelling indices much higher? Are you holding too much bearish risk?

Linda Piazza : 5/30/2008 9:44:47 AM

If I'm just looking at charts and not thinking about the Chicago PMI to be released in a few minutes, I would suggest that if the OEX closes this 15-minute period at or below 639.80 potential Keltner resistance, then it's set a short-term potential downside target of 637.25 and maybe even 636.29. However, it's dangerous to ignore the potential effect of the Chicago PMI. Since I don't know what the numbers will show, it's impossible to predict how markets will react, but do be aware that they could undo everything you're seeing on a short-term chart. If you've got too much risk on the table, consider lightening it, now.

Linda Piazza : 5/30/2008 9:40:46 AM

No, my other source also says the Chicago PMI is released at 9:45 am ET, so I guess that's it.

Linda Piazza : 5/30/2008 9:39:39 AM

I'm sure others have warned subscribers this morning of the day's releases, but do factor in the Chicago PMI at 9:45 (according to one source) and the revised Michigan Sentiment at 9:55. The Chicago PMI, in particular, could be market moving. I'm going to recheck that time, though, because I thought it was released at 10:00.

Linda Piazza : 5/30/2008 9:37:58 AM

Keltner outlook on the A/D line: The A/D line opened in the upper or more bullish half of its 15-minute Keltner chart, but below yesterday's close and immediately started dropping to test the central basis line, now at about +190, with the A/D line now at +202. Next support, should this fail, is at about -140.

Linda Piazza : 5/30/2008 9:35:50 AM

The SPX faces potential resistance on 15-minute closes at 1401 and then at 1404.1-1406.11.

Linda Piazza : 5/30/2008 9:34:46 AM

The OEX is facing potential resistance on 15-minute closes at 639.90 and then at 641.85-642.63.

Linda Piazza : 5/30/2008 9:33:30 AM

My view of what's happening with the OEX is similar to that seen on the SPX chart that was linked to my 9:30:44 post. The OEX yesterday tested the converging 10- and 30-sma's but couldn't close above them. They're converging near 642-642.50. As I said before I left yesterday, that leaves the OEX vulnerable to another downturn toward the week's low, and we may have to endure a day or two of chopping price action before we know whether it will break through or roll down again.

Linda Piazza : 5/30/2008 9:30:44 AM

Here's my SPX chart from Tuesday night's Wrap, with the original annotations but updated prices. My view hasn't really changed. Link
Because yesterday's close was at the 30-sma rather than truly above it, I still consider the SPX as testing that converging resistance and still vulnerable to a downturn. It could be several days of choppy attempts to rise to know whether the SPX can break through that resistance or will roll down again.

Keene Little : 5/30/2008 9:23:24 AM

It's been a fairly steady rise in equity futures since the low yesterday evening. NQ has already rallied above yesterday's high and if that holds then NDX will also. If SPX and DOW follow to new highs that could set up a potentially bullish scenario so bears need to be very careful here. But a new high for NDX would not necessarily be bullish (the wave count for this week's rally would be a corrective 7-wave move). Interestingly the RUT futures (ER) are relatively weaker this morning after being the stronger index all week.

The bottom line is that the bears need to see a quick failure of any early morning rally (and a short against the highs for the DOW and SPX are still good plays) but any sustained rally today could be a bullish sign. I'll be away from the market for the first hour so I'll be back about 7:30 AM.

Jane Fox : 5/30/2008 8:57:58 AM

All overnight markets made higher highs and lows but only the NDX futures market was able to break its previous day high. Link